The Unthinkable Happened: A Samsung (KRX: 005930) "Replacement" Galaxy Note 7 Just Blew Up - Could Spell Disaster For The Phone Maker

The box of the exploding Milky way Note 7 with the black box indicator for the replacement phone clearly visible (top centre).

This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

For Samsung (KRX:005930), the unthinkable has happened: just a few weeks into company's efforts to replace all defective Galaxy Note vii devices, one has caught fire on an plane. And the shocking matter about this is the fact that information technology wasn't a defective ane at all, it was a "replacement" Galaxy Annotation 7 provided past the visitor and supposedly costless of the heating troubles that plagued its old self. Needless to say, the phone maker has spent a lot of resources on attempting to amicably supercede all the existing Galaxy Annotation vii user base, including selling its stake in some prominent companies to enhance capital for this venture. It goes without maxim that all of that effort would go to complete waste if the replacement phones start bravado upward also - and from what we tin come across, the unthinkable has happened.

'Replacement' Milky way Note 7 catches burn during boarding - People being told to shift away from Samsung (KRX:005930) phones

There are two major ways to spot a replacement Milky way Note 7. Firstly, the box has the black square on it to indicate the fixed version of the Milky way Note 7 and secondly, the on-screen display also has a green bombardment logo instead of the standard white one- something they got special permission from Google to apply. All of these visual cues were meant to enforce the perception that the new Galaxy Notation 7 models were "stock-still" and free from whatsoever overheating (or at to the lowest degree exploding) concerns. The Galaxy Note vii that just exploded had both these markers and was clearly a replacement phone and did only what it was designed to never do - it exploded.

What happened?

The incident happened when passengers were boarding Southwest Airlines flying 944 from Louisville to Baltimore. The passenger in question was Brian Light-green and reportedly the phone was at an 80% charge level, turned off and in his back pocket when the device started overheating and spewing smoke. That is when he took it out of his pocket and dropped information technology on the carpeted flooring of the plane, where it soon defenseless burn. The passengers were and then quickly evacuated as smoke started to make full the cabin. Fortunately, there was no harm to life or holding during the incident apart from some burn marks on the rug and unscheduled maintenance for the plane.

That doesn't mean that it could not have gone badly. Had the Samsung (KRX:005930) Annotation 7 decided to overheat but a few moments after, the consequences could have been disastrous. The cabin of an airplane in flying is completely airtight off infinite and would have meant injury or at least serious discomfort to passengers while the plane made an emergency landing. At that place are reports that the company has placed all of Samsung's phone on the no-fly list, effective immediately.

What does this mean for Samsung (KRX:005930)? Preliminary analysis of financial impact

The consequences of this event on the company volition exist astringent. The most alarming thing virtually all of this is the fact that the exploding note 7 was one that was not supposed to explode. This brings into question the safety of every single Galaxy Note 7 device out there - including the ones that Samsung has replaced and promised to be safety. It likewise means that the huge amount of cost the phone maker has incurred could be all for nothing. Since this is a developing story, we withal advise a petty corporeality of circumspection merely the evidence then far is pretty damning.

The stock price of Samsung (KRX:005930) took quite a hit when the initial reports of the Galaxy Annotation 7 exploding started coming in. However, once it was clear that the visitor had started to get things in control again, the tendency quickly shifted to the bullish side and the stock hands recovered all the market cap that had been lost in the fiasco - equally yous can see from the dip in the graph below. needless to say, the recovery was based on the fact that the replacement phones would practise what they were intended to practice: not explode. If this basic assumption goes abroad, then the visitor'due south stock is exposed to severe weakness towards primordial support levels. Just by eyeballing the graph, I can tell you that the nearest support level should be expected effectually the 1,465,000 level in the issue of an Information Pour.

Billions, but how many of them?

After the recall was first announced, initial estimates put the cost at virtually U.s.a.$i billion. It was painful, sure, but if they categorically dealt with the effect, information technology would probably take been coin well worth spending. Now however, we take to question whether the Annotation 7 itself is irreparably tainted. Co-ordinate to Credit Suisse estimates, Samsung Electronics gets about $600 and $108 dollars in revenue and profit respectively from each Annotation vii sold. Analysts put the expected numbers to be sold this year at anywhere from 12 to 14 million units, thereby expecting upward to most US$one.five billion in profit to be contributed by this ane model alone, if that disappears,plus the costs of a potentially pointless retrieve and how to handle all the units in the channel and production still, well... this is material information.

In fact, if investors become bearish about this scrip then you can look the stock price to breeze past the previous support level every bit well - since the cost incurred by the company to prepare the event would have substantially gone to waste. Ane thing we tin state for certain, in the firsthand aftermath of this outcome, the stock cost is going to be extremely volatile. At this point in time, we don't know for sure whether this replacement Galaxy Note vii exploding was but a very improbable and bizarre coincidence or something that is incorrect with the Galaxy Note 7 at a fundamental level. Information technology is besides my duty to tell you lot that as far every bit we know, all the evidence points to an inherent problem, if this was indeed, a replacement Galaxy Annotation 7.

The company has not yet responded to this event, but whenever they do, this can merely become ii ways. Either this was an isolated event, and nosotros will probably never see a repeat episode or the Galaxy Note 7 replacement phones exercise take a problem and the company will be forced to practically write off the Milky way Note 7 production line - since incurring, fifty-fifty more, cost for a replacement-replacement Annotation vii would be impractical, to say the to the lowest degree. Either manner, the stock price is going to exist seeing some very turbulent times come market open and will probably stay that way for a while at present. Expect panic selling by investors who have already borne the price shock of the initial recall.

Another very important affair to mention is the fact that the user sentiment regarding Samsung devices is changing brutally. We accept seen editors of various tech publications urging users to shift to either an iPhone seven or the new Pixel series. This is something that is going to crusade brand problems with Samsung (KRX:005930) in the long run. The public does not easily forget and smartphones aren't exactly inexpensive present. The average consumer might not exist willing to risk his hard-earned cash on a product that might or might not explode, regardless of how hard Samsung tries to convince them it safety. Pregnant trust has been lost in this case every bit far as the consumer perception goes and the company will have to piece of work hard to recover it - or else risk losing a portion of their expert will.

A brunt shared is a burden halved, or is information technology?

Concluding point here. Samsung was likely not planning on bearing the costs of the initial recollect lonely. It's likely the giant would have looked to its bombardment partners Samsung SDI (KRX: 006400) and Amperex Technology to shoulder some of the costs. Questions will have to be raised over again as to whether the fault is truly in the batteries or if there is a fundamental flaw in the design of the Note 7. Additionally, how capable these other companies are of sharing the costs is too a question marker as the costs no doubt continue rising.

Source: https://wccftech.com/samsung-krx-005930-galaxy-note-7-blew-up-disaster/

Posted by: fierropornat.blogspot.com

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